Setting Your Freelance Writing Fees – Part 1 – Tracking Expenses

The first thing you need to know when you determine how much to charge for your writing is how much you’re actually spending each month. Unless you already track your expenses on a regular basis, I’m going to suggest you log in every penny you spend for the next 30 days.

Getting Out Of Vagueness

Most people have a general idea of how much they spend but if the truth be told, they don’t really know, at least not with any precision. That vagueness usually result in what some call money leaks. Money leaks are usually impulse buys or things like expensive coffee drinks.

Tracking every penny is a pain, until you begin to see the results.

How Tracking Every Expense Helps

Here are the positive results I experience because I track all my spending.

Tracking expenses creates clarity – I no longer worry if a check will bounce or if I have enough money to take a class or go to a conference because I know. I actually create an earning and spending plan each month and then track each category. If I spend too much on groceries I know it before that extra spending gets me in trouble and I can make adjustments. It’s cool. I like the clarity.

There’s nothing wrong with spending the money you earn. The problem is when we unconsciously spend more than we meant to. Tracking every expense gets us to clarity about how we’re really spending our money.

Clarity about spending means we can make better choices. Choice empowers us and helps us expand.

Tracking expenses also pays off at tax time if you do it for the whole year. Many of the items you buy, even on impulse, are actually business expenses. Unless you keep records, it’s impossible to remember all the books, magazines, paper, pencils, etc. that are legitimate deductions.

Another positive fall-out I’ve had as a result of recording each expense is that I spend money more consciously, which often means I don’t spend on things I don’t really want or need. That isn’t the goal of tracking, but it’s a nice benefit.

Because I track my expenses I’m able to plan for savings and investments in new equipment or a real vacation.

Because I track my expenses, when I set my fees I’m not just guessing at what I need; I know.

How to Track Your Expenses

To track expenses effectively you a method. I save all my receipts. I also carry a 3×5 card and when I spend some money that doesn’t generate a receipt, I write it down on the card. Other people make good use of small notebooks or the calendar they carry with them at all times. Some people use their credit or debit cards as a way to track everything. That can work especially if you pay your credit card off every month.

It sounds like a lot of work, and for the first week or so, it will be. But your goal is to get clear on what you spend. Once you develop a routine, it’s simple and takes very little time.

Categorizing Expenses

Tracking expenses won’t do much good if you don’t, at least monthly, sort those expenses into useful categories. You can do this on a spreadsheet, either computerized or by hand, or you can use bookkeeping software. I use Quicken Home & Business 2009It’s pretty easy to learn the basics which is all I really need.

I’ve also learned to keep the categories pretty simple.

You Also Have To Track Income

Freelancers tend, I think, to be very good at what they do and not so good at the business side of it. Knowing exactly how much you earn and where it’s coming from is critically important.

Once you really know what all your expenses are, determining the fees you charge is much easier.

Hey, this really works. I started tracking my expenses this year. I made a quite elaborate excel workbook -with percentages and all- which adds and subtracts every penny and I’ve become more conscious about how I spend money. I hadn’t notice that I spend about 15% of my income in drinks and some “small” expenses. Now I say to my self “well, I have the MONEY to buy this and that, but according with my projected budget I can’t afford it”.